Bitcoin crossed above $17,000. Have people who do not own any Bitcoin missed out?

(The views expressed below are merely the personal opinion of the author and are not financial advice.)

Bitcoin hit a new milestone by surpassing the mindboggling price point of $17,000 per Bitcoin, even reaching as far as almost $ 20,000 per Bitcoin mid December 2017. These new highs may have people who do not own any Bitcoin (99% of the world population if this makes you feel any better ;-)) wondering if they have missed out on this amazing investment opportunity?

As already briefly touched upon in my previous blog post of December 13th 2017, one way to look at Bitcoin is to view it as a store of value, comparable to gold.

The characteristics generally believed to grant gold its status as a store of value and hedge against market turmoil and inflation are the fact that it is:

  • scarce (there is a limited supply);
  • fungible, (one ounce of gold can be interchanged with any other ounce of gold); 
  • portable (gold can be divided into pieces, however big or small); and
  • durable (gold is a nobel metal resistant to corrosion and oxidation).  

When compared to gold, one can easily observe that Bitcoin shares all of the above-mentioned characteristics of gold. More so, it could be argued that Bitcoin outclasses gold in respect of some of the above-mentioned characteristics. Indeed, Bitcoin is not only scarce, but has actually a limited fixed supply of a maximum of 21 million Bitcoins. As a digital piece of information, which can be divided up to 8 decimal places and be sent instantaneous via the internet, Bitcoin is both more portable and durable than gold. It is therefore not surprising that many well-known investors and participants in the crypto currency space who are knowledgeable about the subject call Bitcoin the equivalent of gold 2.0.

The market cap of Bitcoin at the time of writing is around 300 billion USD, compared to the market cap of gold estimated to be around 7.5 trillion USD .

If Bitcoin is able to capture only a very small percentage of gold’s market cap (and without taking into account its other possible use cases, such as a global transactional currency), the Bitcoin price has still massive upside potential at the time of writing (December, 20th 2017) even at its current valuation of around $17,000 per Bitcoin. According to the Winklevoss brothers (founders of the Gemini crypto currency exchange), if Bitcoin manages to disrupt gold, we could still see a 20x increase in the valuation of Bitcoin.

 

Of course, be smart and only invest what you can afford to lose.

Cheers 

Mike

Feel free to leave a comment below. Would love to hear your thoughts on how far you believe Bitcoin can go!

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